Key Takeaways
- • Highline Real Estate Capital, a Miami-based firm, launched a $350 million distressed commercial real estate fund targeting the Southeast market with a focus on office, retail, multifamily, and industrial properties.
- • The fund structure deploys $75 million in discretionary capital commitments, $100 million in joint-venture commitments with partners, and $175 million in debt financing to provide both equity and debt solutions to distressed property owners.
- • Federal Reserve rate hikes since March 2022 have created a meaningful bid-ask spread in commercial real estate, with transaction volume down approximately 70 percent from peak levels, creating the investment opportunity Highline is targeting.
- • Highline's leadership—David Moret (principal), Matt Papunen (principal), and David Milgram (partner)—bring significant operating experience, including 20 years at CREC Real Estate and previous roles at Lennar Corp., positioning the firm for direct property acquisitions in office and retail while pursuing partnerships for industrial and multifamily investments.
- • The fund's strategy reflects a cyclical playbook: capitalizing on market capitulation following an exuberant period as property owners face pressure to accept lower valuations amid constrained financing conditions.
Summary
Highline Real Estate Capital has launched Highline Real Estate Fund 1, L.P., a $350 million investment vehicle targeting distressed commercial real estate assets in the Southeast. The fund will provide both equity and debt financing to property owners struggling with sales or refinancing challenges across office, retail, multifamily, and industrial sectors, while also acquiring distressed properties directly.
The fund's capital structure reflects a hybrid approach: $75 million in discretionary capital commitments from Highline, $100 million in joint-venture commitments alongside other institutional funds, and $175 million in debt financing capacity. According to David Moret, principal of Highline, the firm intends to acquire office and retail properties directly or with select partners, while pursuing industrial and multifamily investments primarily through partnership arrangements.
The timing of the fund launch reflects significant market dislocation in commercial real estate. Since March 2022, Federal Reserve interest rate increases have materially constrained transaction volumes, which Moret noted are down approximately 70 percent from peak levels. This has created a substantial bid-ask spread as property owners resist accepting lower bids reflecting higher capitalization rates, while buyers demand meaningful discounts to justify elevated borrowing costs. Moret characterized the current environment as consistent with historical market cycles: "You have an exuberant market, then you have a major shift … We are all kind of waiting for capitulation."
Highline, formed in 2016, has established an operating track record in property acquisition, improvement, and disposition. The firm's leadership includes Moret, who spent 20 years at CREC Real Estate in Florida as partner and head of acquisitions and investment; Matt Papunen, former managing director at Lennar Corp.; and partner David Milgram. This operational experience in office and retail properties positions the firm to capitalize on opportunities as distressed sellers move toward price discovery in the current market environment.
The fund's capital structure reflects a hybrid approach: $75 million in discretionary capital commitments from Highline, $100 million in joint-venture commitments alongside other institutional funds, and $175 million in debt financing capacity. According to David Moret, principal of Highline, the firm intends to acquire office and retail properties directly or with select partners, while pursuing industrial and multifamily investments primarily through partnership arrangements.
The timing of the fund launch reflects significant market dislocation in commercial real estate. Since March 2022, Federal Reserve interest rate increases have materially constrained transaction volumes, which Moret noted are down approximately 70 percent from peak levels. This has created a substantial bid-ask spread as property owners resist accepting lower bids reflecting higher capitalization rates, while buyers demand meaningful discounts to justify elevated borrowing costs. Moret characterized the current environment as consistent with historical market cycles: "You have an exuberant market, then you have a major shift … We are all kind of waiting for capitulation."
Highline, formed in 2016, has established an operating track record in property acquisition, improvement, and disposition. The firm's leadership includes Moret, who spent 20 years at CREC Real Estate in Florida as partner and head of acquisitions and investment; Matt Papunen, former managing director at Lennar Corp.; and partner David Milgram. This operational experience in office and retail properties positions the firm to capitalize on opportunities as distressed sellers move toward price discovery in the current market environment.
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